Much has been written lately about the unbundling of cable TV. But its more than that. Way more. First, a little history. In 1933 RCA introduced an improved camera tube and this was dubbed the ‘Iconoscope’. In 1941, the United States implemented 525-line television. By 1947, when there were 40 million radios in the U.S., there were about 44,000 television sets (with probably 30,000 in the New York area). Commercial color television broadcasts began on CBS in 1951.
Here is where it really gets interesting. In 1951, TV broadcasting was free. Nobody was paid for the use of any content. In 1957, 25 million Americans watched the broadcast of a musical version of Cinderella. Executives in Hollywood calculated that if they had received a fee of $0.25 per TV set/viewer, they would have netted $6m in one day without any distribution costs.
The first basic cable network, launched via satellite in 1976. That was Ted Turner’s superstation WTCG in Atlanta. Cable is often divided between basic and Pay TV. Basic cable networks receive at least some funding through “per-subscriber fees,” fees paid by the cable TV systems for the right to include the television network in its channel lineup. The fees that the ‘basic’ channels charge have grown and increased almost every year. The size of these fees varies widely. ESPN gets $5.54 per subscriber a month (from each and every cable system that carries ESPN), while Viacom’s MTV gets 41 cents per subscriber. Niche channels get much less. MTV Hits, for instance, gets two cents. The big 4 ‘broadcast’ networks get ‘re-transmission’ fees. CBS expects to get over $ 1b in fees over the next few years alone. Ironically, cable television in the United States in its first twenty-four years was used almost exclusively to relay over-the-air commercial broadcasting television channels to remote and inaccessible areas.
So, cable operators faced with increasing fees every year had to ‘bundle’ channels together into ‘packages’. Which is what we all now have. The question is whether a full ‘a-la-carte’ offering to consumers would be a dream or a disaster for the cable TV industry. I am not attempting to draw any conclusions here one-way or the other.
With this debate going on along comes a service that really begins to make it look like 1951 all over again. And this time its not broadcast or cable, instead its carried over the internet. And that makes it all the more pervasive and certainly disruptive.
Enter Barry Diller’s ‘Aereo’ TV. For $8 to $12. a month, you get over 30 channels of programming, including ABC, CBS, NBC, FOX, PBS, movie channels (ION, etc.) Spanish and Asian language programming and even something for the kids, PBS KIDS (which has some excellent shows – move over Nick Jr.). You can record a program while watching another . You don’t even need a physical DVR box, your show is saved online in the ‘cloud’. There are no cables, no antennas and no set-top boxes – nothing, nada. The only thing you need is Internet connectivity. Must you watch it on line? Nope. If you’ve got an Apple TV or Roku or any Internet connected TV, you’re all set. Add Netflix or Amazon Prime and you’ve got new movies, VOD and pay-tv programming. Do I really need cable TV too?
Aereo is being sued big time by plenty of broadcasters. Its only in NYC right now but in about a month or so, 22 more major cites around the country will offer it. So, will this cause many people to disconnect their cable TV? Will this prompt the operators to un-bundle everything. Is this the ‘cord cutter’ that’s been talked about for some time now ? I for one would disconnect my cable TV. I hardly watch it. I do want to see the 4 main broadcast networks and have some programming for the kids. Aereo provides this.
The unraveling of television has only just begun. Stay tuned.